Constructive dismissal occurs when an employee resigns in response to a fundamental or repudiatory breach of their contract of employment by their employer. Put simply, the dismissal takes effect as a result of a resignation, as opposed to a decision reached and imposed by the employer.
In order to succeed in claiming constructive dismissal, an employee must establish:
- firstly, a repudiatory breach on the part of the employer (discussed below);
- secondly, that he/she resigned in response to the repudiatory breach; and
- thirdly, that he/she did not delay (and in so doing waive or accept the breach).
A repudiatory breach
The term repudiatory breach (often used interchangeably with the term ‘fundamental breach’) denotes serious wrongdoing on the part of the employer that goes to the heart of the contractual relationship. A repudiatory breach has been defined in the following terms:
“… the employer has, without reasonable and proper cause, conducted himself in a manner calculated or likely to destroy or seriously damage the relationship of mutual trust and confidence.”
A repudiatory breach may consist of a one-off act or a course of conduct extending over a period of time. Further, it may entail the breach of an express contractual term, or an implied contractual term (commonly the implied term of trust and confidence). Typical examples include:
- Unilaterally changing an employee’s job content or status;
- Humiliating an employee in front of others (or marginalising/ostracising an employee);
- The imposition of an unwarranted or disproportionate disciplinary sanction;
- Withholding pay or benefits;
- Failing to deal with a (serious) grievance adequately and /or in good time; or
- Subjecting an employee to an excessive workload or intolerable working conditions.
Acts of discrimination will, almost without exception, constitute a repudiatory breach of contract.
The test for whether or not there has been a repudiatory breach is an objective one. It involves looking at all the circumstances from the perspective of a reasonable person in the position of the innocent party. The intentions of the employer are therefore largely irrelevant.
Acceptance of breach by employee
An employer's repudiatory breach does not automatically bring the contract to an end. If an employer commits a repudiatory breach, the employee can choose either to affirm the contract (i.e. uphold the contract) or, alternatively, accept the repudiation, in which case the contract is at an end. Acceptance of a breach must be communicated (or at least clearly demonstrated) to the party in breach. Usually this will involve an employee resigning orally or in writing.
If the employee affirms the contract, even once, then they will have waived their right to accept the repudiation. A prolonged delay in responding to a breach may well be taken as evidence of affirmation of the contract.
Similarly, it isn’t possible for the employer to "cure" or put right a repudiatory breach of contract. Unless the employee has waived the breach or affirmed the contract, they have an absolute right to choose whether to treat the breach as terminal.
An employee who can establish that he/she has been constructively dismissed will be entitled to damages for breach of contract. The scope of contractual damages will usually be the value of the employee’s net remuneration package for their contractual notice period (but may, in some cases, extend beyond this). The financial cap on contractual claims within the Employment Tribunals is £25,000. An employee who is constructively dismissed may also be entitled to compensation for unfair dismissal. At present, the vast majority of constructive unfair dismissal cases are subject to a cap of either: £78,962 or 52 weeks’ gross pay (whichever is lower).
The right to bring a claim for constructive dismissal is available to employees with two years' continuous service. The qualifying period does not apply, however, in most cases where the constructive dismissal is for an automatically unfair reason. Such cases are rare. Employment Tribunal claims must be commenced (via the ACAS Early Conciliation process initially) within 3 months less one day from the date on which the employment contract is terminated.
Posted on 12/10/2016 in Legal UpdatesBack to Knowledge